80 FR 13464 - Notice of Finding That Banca Privada d'Andorra Is a Financial Institution of Primary Money Laundering Concern

DEPARTMENT OF THE TREASURY

Federal Register Volume 80, Issue 49 (March 13, 2015)

This document provides notice that, pursuant to the authority contained in the USA PATRIOT Act, the Director of FinCEN found on March 6, 2015 that reasonable grounds exist for concluding that Banca Privada d'Andorra (``BPA'') is a financial institution operating outside of the United States of primary money laundering concern.

[Federal Register Volume 80, Number 49 (Friday, March 13, 2015)]
[Notices]
[Pages 13464-13466]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-05911]


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DEPARTMENT OF THE TREASURY


Notice of Finding That Banca Privada d'Andorra Is a Financial 
Institution of Primary Money Laundering Concern

AGENCY: Financial Crimes Enforcement Network (``FinCEN''), Treasury.

ACTION: Notice of Finding.

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SUMMARY: This document provides notice that, pursuant to the authority 
contained in the USA PATRIOT Act, the Director of FinCEN found on March 
6, 2015 that reasonable grounds exist for concluding that Banca Privada 
d'Andorra (``BPA'') is a financial institution operating outside of the 
United States of primary money laundering concern.

DATES: The finding referred to in this notice was effective as March 6, 
2015.

FOR FURTHER INFORMATION CONTACT: FinCEN, (800) 949-2732.

SUPPLEMENTARY INFORMATION:

I. Statutory Provisions

    On October 26, 2001, the President signed into law the Uniting and 
Strengthening America by Providing Appropriate Tools Required to 
Intercept and Obstruct Terrorism Act of 2001 (the ``USA PATRIOT Act''), 
Public Law 107-56. Title III of the USA PATRIOT Act amends the anti-
money laundering provisions of the Bank Secrecy Act (``BSA''), codified 
at 12 U.S.C. 1829b, 12 U.S.C. 1951-1959, and 31 U.S.C. 5311-5314, 5316-
5332, to promote the prevention, detection, and prosecution of 
international money laundering and the financing of terrorism. 
Regulations implementing the BSA appear at 31 CFR Chapter X.
    Section 311 of the USA PATRIOT Act (``Section 311''), codified at 
31 U.S.C. 5318A, grants the Secretary of the Treasury (``the 
Secretary'') the authority, upon finding that reasonable grounds exist 
for concluding that a foreign jurisdiction, financial institution, 
class of transaction, or type of account is of ``primary money 
laundering concern,'' to require domestic financial institutions and 
financial agencies to take certain ``special measures'' to address the 
primary money laundering concern. The Secretary has delegated this 
authority under Section 311 to the Director of FinCEN.
    On March 6, 2015, the Director of FinCEN found that reasonable 
grounds exist for concluding that Banca Privada d'Andorra (``BPA'') is 
a financial institution operating outside of the United States of 
primary money laundering concern. The Director considered the factors 
listed below in making this determination.

II. The History of BPA and Jurisdictions of Operation

    BPA is one of five Andorran banks and is a subsidiary of the BPA 
Group, a privately-held entity. Founded in 1962, BPA is the fourth 
largest bank of the five banks in Andorra and has 1.79 billion euro in 
assets. The bank has seven domestic branches in Andorra and five 
foreign branches that operate in Spain, Switzerland, Luxembourg, 
Panama, and Uruguay. BPA has fewer domestic and foreign branches than 
the other major banking groups in Andorra. BPA's Panama branch (``BPA 
Panama'') is licensed as an offshore bank by the Superintendecia de 
Bancos de Panama, which is the bank regulator for the Panamanian 
government. BPA has correspondent banking relationships in the major 
North American, European, and Asian financial centers. At the time of 
this Finding, BPA has four U.S. correspondent accounts.

III. The Extent to Which BPA Has Been Used To Facilitate or Promote 
Money Laundering

    FinCEN has found that reasonable grounds exist for concluding that 
several officials of BPA's high-level management in Andorra have 
facilitated financial transactions on behalf of Third-Party Money 
Launderers (``TPMLs'') providing services for individuals and 
organizations involved in organized crime, corruption, smuggling, and 
fraud. Criminal organizations launder their proceeds through the 
international financial system. These organizations often encounter 
obstacles in achieving direct access to financial institutions 
internationally and in the United States because of their illicit 
activities. To obtain access to financial institutions, some criminal 
organizations use the services of TPMLs, including professional 
gatekeepers such as attorneys and accountants. TPMLs engage in the 
business of transferring funds on behalf of a third party, knowing that 
the funds are involved in illicit activity. These TPMLs provide access 
to financial institutions and lend an aura of legitimacy to criminal 
actors who use the TPMLs' services. Some TPMLs explicitly market their 
services as a method for criminal organizations

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to reduce transparency and circumvent financial institutions' anti-
money laundering (``AML'')/countering the financing of terrorism 
(``CFT'') controls. TPMLs provide access to the international financial 
system for criminal organizations through the TPMLs' relationships with 
financial institutions.
    Financial institutions that facilitate third-party money laundering 
activity allow criminals to circumvent AML/CFT controls both in the 
United States and internationally, and, thus, provide a gateway for 
undermining financial integrity. TPMLs use a wide variety of schemes 
and methods to infiltrate financial institutions. These schemes and 
methods include using illicit shell and shelf corporations, layering 
financial transactions, creating and using false documentation, and 
exerting improper influence on employees in financial institutions or 
on government officials. A shell company is an entity that is formed 
for the purpose of holding property or funds and does not itself engage 
in any significant business activity. A shelf corporation is an entity 
that is formed and then placed aside for years. The length of time that 
a shelf corporation has been in existence adds legitimacy to the entity 
and makes it a prime vehicle for money laundering.

A. BPA Facilitated Financial Transactions for TPMLs Involving the 
Proceeds of Organized Crime, Corruption, Human Trafficking, and Fraud

    FinCEN has found that reasonable grounds exist to support the 
following points: Several of BPA's high-level management have 
facilitated financial transactions on behalf of TPMLs providing 
services for individuals and organizations involved in organized crime, 
corruption, human trafficking, trade-based money laundering, and fraud. 
High-level management at BPA maintained close relationships with these 
TPMLs. Based on those relationships, TPMLs promoted their services to 
other illicit actors and relied on BPA to provide access to the 
financial system for criminal organizations. TPMLs successfully used 
BPA to facilitate money laundering activity because the Bank's weak 
AML/CFT controls allowed TPMLs to conduct this high-risk banking 
activity without detection, and the TPMLs were able to establish close 
relationships with complicit bank personnel who facilitated illicit 
transactions.
    From 2011 to February 2013, High-Level Manager A at BPA in Andorra 
provided substantial assistance to Andrey Petrov, a TPML (``TPML 1'') 
working for Russian criminal organizations engaged in corruption. 
Petrov facilitated several projects on behalf of transnational criminal 
organizations. Petrov used the proceeds of transnational organized 
crime to bribe local officials in Spain. Petrov secured beneficial 
zoning rights and contracts from a local official. After Petrov's 
application for a line of credit at a Spanish bank was rejected, High-
Level Manager A ensured that Petrov could obtain a line of credit from 
another Spanish bank and that the application would not be perceived as 
suspicious. Petrov arranged for High-Level Manager A to fly to Russia 
to meet with transnational organized crime figures.
    High-Level Manager A created accounts at BPA that facilitated false 
invoicing to disguise the origin of illicit funds. In addition, a 
Russian businessman known to be connected to transnational criminal 
organizations worked with BPA, including High-level Manager A, to 
establish front companies and foundations used to move funds believed 
to be affiliated with organized crime. Both Petrov and the Russian 
businessman relied on BPA to facilitate the laundering of the organized 
crime proceeds and maintained large bank accounts with BPA. In February 
2013, Spanish law enforcement arrested Petrov and several associates 
for laundering approximately 56 million euro. Petrov is suspected to 
have links to Semion Mogilevich, one of the FBI's ten ``most wanted'' 
fugitives.
    In addition to BPA's facilitation of illicit financial transactions 
by Petrov, in a separate scheme, a Venezuelan TPML (``TPML 2'') and his 
network relied on BPA to deposit the proceeds of public corruption. 
This money laundering network worked closely with high-ranking 
government officials in Venezuela, resident agents in Panama, and an 
Andorran lawyer to establish Panamanian shell companies. The money 
laundering network owned hundreds of shell companies and engaged in a 
wide variety of business for illicit profit. This network was well 
connected to Venezuelan government officials and relied on various 
methods to move funds, including false contracts, mischaracterized 
loans, over- and under-invoicing, and other trade-based money 
laundering schemes.
    TPML 2 had a relationship with High-Level Manager B at BPA. TPML 2 
gave High-Level Manager B false contracts to support transactions 
purported to be on behalf of Venezuelan public institutions including 
Petroleos de Venezuela S.A. (``PDVSA''), the public oil company of 
Venezuela. In some instances, these contracts did not list a customer 
for the services. High-Level Manager B's reliance on these contracts 
demonstrated transaction monitoring and due diligence failures. Also, 
High-Level Manager B coordinated the opening of a shell company on 
behalf of the Venezuelan TPML. High-Level Manager B worked with High-
Level Manager A on the illicit Venezuelan transactions. BPA facilitated 
the movement of approximately $2 billion through these shell company 
accounts maintained at BPA. Between January 2011 and March 2013, BPA 
facilitated the movement of at least $50 million in send and receive 
transactions that were processed through the United States in support 
of this money laundering network. In 2014, BPA continued to facilitate 
the movement of funds related to this scheme through the U.S. financial 
system. Overall, BPA facilitated the movement of $4.2 billion in 
transfers related to Venezuelan money laundering.
    In addition to BPA's facilitation of illicit financial transactions 
by Petrov and Venezuelan money launderers, from 2011 to October 2012, 
High-Level Manager C at BPA accepted bribes to process bulk cash 
transfers for TPML Gao Ping (``TPML 3''). Ping acted on behalf of a 
transnational criminal organization engaged in trade-based money 
laundering and human trafficking and established relationships with 
Andorran banks to launder money on behalf of his organization and 
numerous Spanish businesspersons. Through his associate, Ping bribed 
Andorran bank officials to accept cash deposits into less scrutinized 
accounts and transfer the funds to suspected shell companies in China. 
One of Ping's key bank executives was High-Level Manager C. High-Level 
Manager C and another bank manager at BPA processed approximately 20 
million euro in cash used to fund wire transfers sent to Ping's 
accounts in China. Spanish law enforcement arrested Ping in September 
2012 for his involvement in money laundering.

B. BPA's Weak AML Controls Attract TPMLs and Allow Its Customers To 
Conduct Transactions Through the U.S. Financial System That Disguise 
the Origin and Ownership of the Funds

    BPA's failure to conduct adequate due diligence on customer 
accounts and its provision of high-risk services to shell companies 
make it highly attractive and well known to TPMLs. TPMLs worked on 
behalf of transnational criminal organizations to facilitate the 
criminal organizations' financial transactions through BPA. In 
addition, TPMLs reportedly coordinated multi-million

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dollar deals related to Venezuelan corruption and represented that 
connections with BPA would facilitate these transactions.
    For example, a TPML (``TPML 4''), who has worked with the Sinaloa 
cartel, facilitated the transfer of bulk cash derived from narcotics 
trafficking in the United States and facilitated financial transactions 
involving the proceeds of other crimes. TPML 4 intentionally bolstered 
connections with BPA to attract money laundering clients and requested 
that clients send smaller transfers through accounts at other 
institutions and to only use accounts at BPA for large transactions. In 
communications with co-conspirators, TPML 4 advertised a relationship 
with BPA in attempts to attract potential money laundering deals. TPML 
4 told clients that this relationship with BPA and other government 
officials would ensure that their transactions would not be scrutinized 
by the financial community. In addition, TPML 4 also marketed services 
to potential clients by providing specific wire transfer instructions 
for accounts at BPA.
    TPML 4 used many methods to avoid detection by law enforcement, 
including planning to increase operations during the U.S. government 
shutdown in 2013. TPML 4 used many Panamanian, Spanish, and Swiss shelf 
corporations to attract clients. Several of these shelf corporations 
had bank accounts, including at BPA.
    BPA's failure to monitor transactions for apparent red flag 
activity attracts TPMLs. Many third-party money laundering transactions 
conducted through BPA lack an apparent business purpose and would be 
identified as high risk by a bank with sufficient AML/CFT controls. For 
example, BPA processed millions of U.S. dollar transactions that listed 
BPA's Andorran address for the originator's or beneficiary's address. 
Although there may be rare occasions when use of the bank's address as 
a bank customer's address of record is legitimate, the processing of a 
high percentage of transactions not containing accurate customer 
address information indicates failure to conduct sufficient due 
diligence on a customer, failure to adequately monitor transactions, or 
possible complicity in money laundering by disguising the origin of 
funds. BPA also attracts TPMLs by knowingly providing services to shell 
and shelf companies and unlicensed money transmitters. As noted above, 
TPMLs rely on shell and shelf companies to shield the identities of 
their clients engaged in criminal activity. BPA's facilitation of this 
high-risk business allows TPMLs to obscure the beneficial ownership of 
these accounts.
    BPA accesses the U.S. financial system through direct correspondent 
accounts held at four U.S. banks. Between approximately 2009 through 
2014, BPA processed hundreds of millions of dollars through its U.S. 
correspondents. These transactions contained numerous indicators of 
high-risk money laundering typologies, including widespread shell 
company activity, unlicensed money transmitters, and other high-risk 
business customers. For example, BPA processed tens of millions of 
dollars on behalf of unlicensed money transmitters through one U.S. 
correspondent. The U.S. correspondent requested that BPA sign an 
agreement to discontinue processing these transactions through its 
account. After these concerns arose, the U.S. correspondent closed 
BPA's account.
    In addition, 62 percent of BPA's outgoing transactions through one 
U.S. correspondent bank involved only four high-risk customers. These 
customers, deemed high-risk by the U.S. correspondent bank, included a 
shell company, an Internet business, and two non-bank financial 
institutions. Between approximately 2007 and 2012, BPA also used its 
U.S. correspondents to send or receive wire transfers totaling more 
than $50 million for Panamanian shell companies that share directors, 
agents, and the same address. These transfers involved large, round 
dollar amounts and did not specify a purpose for the transactions. When 
U.S. correspondents requested additional information, BPA either failed 
to respond or provided extremely limited information.

IV. The Extent to Which BPA Is Used for Legitimate Business Purposes

    It is difficult to assess on the information available the extent 
to which BPA is used for legitimate business purposes. BPA provides 
services in private banking, personal banking, and corporate banking. 
These services include typical bank products such as savings accounts, 
corporate accounts, credit cards, and financing. BPA provides services 
to high-risk customers including international foreign operated shell 
companies, businesses likely engaged in unlicensed money transmission, 
and senior foreign political officials. Because of the demonstrated 
cooperation of high level management at BPA with TPMLs, BPA's 
legitimate business activity is at high risk of being abused by money 
launderers.

V. The Extent to Which This Action Is Sufficient To Guard Against 
International Money Laundering and Other Financial Crimes

    FinCEN's March 13, 2015 proposed imposition of the fifth special 
measure, pursuant to 31 U.S.C. 5318A(b)(5), would guard against the 
international money laundering and other financial crimes described 
above directly by restricting the ability of BPA to access the U.S. 
financial system to process transactions, and indirectly by public 
notification to the international financial community of the risks 
posed by dealing with BPA and TPMLs.

    Dated: March 6, 2015.
Jennifer Shasky Calvery,
Director, Financial Crimes Enforcement Network.
[FR Doc. 2015-05911 Filed 3-12-15; 8:45 am]
BILLING CODE 4810-02-P